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UK manufacturing grinds to life?

The March ONS data is out and, despite the recession, manufacturing is making a half-hearted comeback with a 0.9% rise.

by Rebecca Burn-Callander

Published: 10 May 2012

Last Updated: 19 Aug 2013

It dipped 0.3% in January, it plummeted 1.1% in February, but now, according to the ONS, March has put a new spring in manufacturing’s step with a 0.9% recovery. But across the first quarter of 2012 as a whole, growth has ultimately flat-lined.

Nevertheless, this 0.9% rise is important. Despite the 0.3% drop in industrial production between February and March, fueled mainly by the volatile state of the energy sector, UK manufacturing has kept its head above water. But the meagre gains reflect weak demand at home, the effects of recession in continental Europe and the flagging demand from export markets further afield.

This prevailing lack of growth has forced the Bank of England’s hand. The MPC has today decided to keep interest rates at the record low of 0.5% to try and boost further business investment. However, the first sight of green shoots may have instilled some confidence in outgoing governor Mervyn King: he has decided not to extend the quantitative easing programme. Or perhaps, with inflation still stubbornly high, King is just playing it safe.

Not that there is any obvious ‘safe’ play in the current climate. Today’s ONS data does little to reverse the picture of a nation sliding back into recession. The April PMI surveys showed the first fall in manufacturers' inflow of orders since November, with exports tumbling at their fastest rate for three years. And the appreciation of sterling is adding to exporters’ woes, both at home and abroad: imports are cheaper than UK-produced goods and British manufactures are being priced out of the market overseas.

All in all, not the most heartening news for the economy. We may have avoided a manufacturing contraction – for now - but growth is looking as hard to find as a sunny day during the soggy Spring weather.